Google-How does it makes money??

Posted: March 24, 2010 in google, Under the hood

Google is an industry giant, google makes millions, google is topping everywhere and what not.
Google does not sell anything, everything you use from them is free and top of that they seem to be very active in the open source community.

Hmmmm,, seems a huge contradiction. Well life is like that only and we all love contradictions, Isn’t it. Actually last week I was sitting with some of my relatives and all the techies of my family were sharing their thought on GOOGLE and its power. Suddenly out of no where a question came from a teen “How does google make money?” After some silence I broke the ice and tried to make that teen understand how google makes money. So here is all who have similar question marks on their minds:

Advertisement: Yes that’s how Google is making its money. Every time you do a search on Google, you’ve probably noticed that there is a section called Sponsored Links. Every time you click on one of those links, Google charge a certain amount of money to the website for the click. Also when you go on a website you’ll notice advertising from Google too. Same thing happens here, when you click, Google charge a certain amount of money to the website you clicked on and part of that money is given to the webmaster publishing the ads. This is called AdSense and is an enormous source of income for Google.

How much does Google charge for a click?
The price advertisers pay for a click depends on a lot of factors and this is where Google is playing smart. They use a sort of bidding system. When you want to advertise with Google, you select keywords you are targeting. Let’s say I own an online mobile store and I want to bring potential customers to my website. I’m going to bid on the keywords mobile and buy mobile online for example. The price I’m going to pay will depend if there is other companies bidding for that keyword. The more companies are fighting for a keyword, the more I’m going to pay for a single click to my website. The price can vary from 0.01$ to 100$ and more. You can imagine that for highly competitive keywords like finance and health it can cost quite a lot of money for a company to advertise with Google. This program of Google is called Adwords.

No production cost
The beauty of google business is that Google doesn’t sell any tangible product. They sell something that doesn’t really exist. They really sell traffic. It mostly comes down to this: They get paid for sending traffic to other websites. That’s why Google seems to be everywhere now: They have to show substantial growth to their stakeholders and to do that they have to drive more and more traffic to provide more and more advertisement.

Hope that clears out atleast some of the mysterious business of Google. Keep questioning, Keep knowing more……..

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